Knowing when and how to file a tax extension may be to your advantage in 2020

A new tax season is coming up fast. 

And when things get in the way of filing your taxes on time, a federal tax extension can provide some much-needed relief, allowing extra time to prepare your return and make sure your taxes get done right. 

Here’s some info on why you may request an extension, when to do so and how to file a tax extension before the 2020 deadline.

Why do people file tax extensions?

People typically file tax extensions to gain more time to file. While the reasons for needing more time may vary, an extension on your federal taxes provides a longer window in which to gather materials, calculate your tax burden and make sure your 2019 return is completed as accurately and thoroughly as possible. 

Learning how to file a tax extension using IRS form 4868 not only gives you more time to file your return, but also:

  • Helps reduce the stress of getting everything together before the April deadline.
  • Allows you to perform a more in-depth review of your tax materials and return.
  • Provides the opportunity to consider and take advantage of all tax benefits available to your family.

Filing an extension on your federal taxes also allows you to avoid tax penalties you would have otherwise incurred for missing the April filing deadline. In some cases, this can amount up to 25% of what you owe the IRS. 

What’s more: submitting a 4868 extension form for your 2019 tax return allows you to take advantage of any retroactive tax law changes made after the April 2020 deadline, a potentially enormous benefit.

How long is a tax extension?

A standard tax extension provides you six months from the April filing deadline to complete your federal tax return. It’s important to note that while a six-month extension gives you a longer period to file, you will still need to pay your total tax balance by the April deadline. 

Is there a penalty for filing a tax extension?

No. The IRS does not penalize taxpayers for filing a federal tax extension, as long it’s filed on time.

But failure to pay your taxes on time or in full can result in significant penalties and interest from the IRS, including:

Interest on your unpaid balance.

Possible late payment penalties when you don’t pay at least 90% of what you owe (generally half of 1% of the total owed for each month, which maxes out at 25%).

Late filing penalties when neither your return nor tax extension form 4868 are filed by the 2020 deadline (5% of what you owe each month, maxing out at 25%).

Of course, if you’re confident you’ll be getting a refund in 2020, you won’t have to worry about making an April tax payment or any penalties related to owed taxes. 

Can you file for an extension online?

You do have the option to file a tax extension online, as long as your tax software supports tax extension form 4868 for your 2019 tax return. Be sure to do your homework and research your options before waiting until the last minute.

What is the tax extension deadline for 2020?

The deadline to file a federal tax extension form by mail or online in 2020 is April 15. Once filed and accepted by the IRS, your new deadline for completing and submitting your federal return will be October 15, 2020. If you’re self-employed and need to make a first quarter estimated tax payment, be sure to send in your 1040-ES no later than the filing deadline.

How to file a tax extension online or by mail in 2020

Here’s how to file a federal tax extension online or by mail during the 2020 tax season:

  1. Make sure a tax extension is best for your tax situation.
  2. Obtain an updated 4868 tax extension form from your tax preparer or the IRS website. 
  3. Complete your 4868 form.
  4. Estimate how much federal tax you owe.
  5. File your tax extension with your estimated tax payment on or before April 15, 2020.

If you’re filing by mail, be sure your form is postmarked Apr. 15 or earlier.

Typically, extensions that are filed online and include a partial or full tax payment will be processed automatically by the IRS. For those unable to make a full tax payment by the April deadline, the IRS offers a number of payment options.

Can I file a second tax extension?

Unfortunately, the six-month tax extension is a one-time deal. Once the October 15 extension deadline is here, you are required to file your federal return and pay what you owe or face a potentially steep failure-to-file penalty (not to mention interest on any remainder of federal taxes owed).

What happens if I miss the tax extension deadline?

No matter the reason, if you fail to file or pay your federal taxes by the October extension deadline, you will be penalized by the IRS. But that doesn’t necessarily mean that all hope is lost. If the deadline has come and gone:

  • File your return as soon as possible. Each day your return goes unfiled can lead to more penalties, so it’s best to take action quickly.
  • Pay as much as you can. Making a payment fast reduces what you owe and shows the IRS you’re taking the situation seriously.
  • Set up tax payments. You may have already set up installment payments after you took steps to file your tax extension; but if you haven’t, now’s the time to start.
  • Consult a tax pro. An experienced tax preparer can help you navigate the situation and minimize the damage moving forward.

I’m out of the country. How do I file a tax extension?

If you are a U.S. citizen or resident alien living abroad at tax filing time, you are automatically granted two extra months past the April 15 deadline to file and pay your taxes. If you are unable to file by June 15, 2020, you may request an additional 4-month tax extension, which gives you until October 15 to file your return.

Those considered “out of the country” include:

  • Taxpayers living and working outside the U.S. and Puerto Rico, and
  • Military personnel serving outside the U.S. (servicemembers in combat zones are often provided even more time to file). 

Need help filing an extension?

If you’re looking to file an extension this year, Liberty Tax® can help. We provide in-office and online solutions for navigating your tax situation and getting the refund you deserve.

For more on how to file a tax extension in 2020, visit your local Liberty Tax® location today.

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